Jan Häggström, chief economist at Swedish bank, Svenska Handelsbanken, was speaking at a joint event organised by Alliance 4 The Black Country and Wolverhampton City Council.
He said it was a very exciting time, especially for economists. He was surprised how much policy response there has been to the crisis, but added that as economic policies had got the world into these problems it would be economic policies that would also get us out.
“Europe wasn’t ready when Lehman Brothers collapsed. EU finance ministers thought they had time and were making plans to run exercises a few months later. It was a wake up call.
“It is easy to blame the bankers, but interest rates became far too low and people and businesses wanted to borrow, which is what has led to record debt. The problems are not as bad in Sweden, but we are still affected by the rest of the world.”
Predicting what will happen next, Mr Häggström said that when interest rates get this close to zero, Central Banks can basically ‘print money’ with quantitative easing. “The trouble is, you can only try things, such as cutting interest rates, so many times. Japan tried in the past and it failed and now it has no where else to go. But it makes sense for the government to borrow money for a period to see us through this transitional period. Otherwise you run the risk of killing off many good companies that will be needed during the upturn.
“There won’t be a 1930s-style depression, but a long period of stagnation could happen. I also expect there will be more consolidation with the banks. There are too many.”
When asked what businesses can do to get out of recession, Mr Häggström said exports have to be directed at emerging and developing countries, because they are the ones that will recover first.
Mike Priddy, vice chairman of the Alliance and branch manager of Handelsbanken in Wolverhampton, said: “It was a real coup to get Jan here as he is much demand around the world for his insightful and forthright views.
“His presentation helped put the problems we are experiencing here in the UK in a global perspective and was generally positive. Many of the delegates left the event saying they were invigorated and that it was good to hear someone say that, while there is a global problem, things are not as bad as they have been portrayed.
“Because of the way the world is today, with globalisation, advanced communications and international travel, this is the first recession where every country in the world will be affected. It was good to hear the UK is not alone, but it is evident that it will take an united effort from the international community to restore things to the way they were.”
Cllr Christine Mills, mayor of Wolverhampton, added: “We are all experiencing the most extraordinary of financial times, not just locally but across the world. As generators of jobs and wealth, the business sector is key to our economic success. I firmly believe that if the city council and businesses continue to work together then we can find solutions to help our citizens and businesses negotiate these difficult times. I’m very pleased to welcome Mr Haggstrom to Wolverhampton to share his views with business leaders from Wolverhampton and the Black Country.”
